Customer Contracts

12 Months Ended

Jun. 30, 2016

Uncompleted Contracts

Contract terms of the Company’s construction contracts generally provide for progress billings based on project milestones. The excess of costs incurred and estimated earnings over amounts billed on uncompleted contracts is reported as a current asset. The excess of amounts billed over costs incurred and estimated earnings on uncompleted contracts is reported as a current liability. Gross and net amounts on uncompleted contracts are as follows:



	June 30, 2016		June 30, 2015
	(In thousands)
Costs and estimated earnings recognized on uncompleted contracts	$	1,875,014	$	1,633,780
Billings on uncompleted contracts	1,829,340		1,644,413
	$	45,674	$	(10,633	)
Shown on balance sheet as:
Costs and estimated earnings in excess of billings on uncompleted contracts	$	104,001	$	86,071
Billings on uncompleted contracts in excess of costs and estimated earnings	58,327		96,704
	$	45,674	$	(10,633	)

Progress billings in accounts receivable at June 30, 2016 and June 30, 2015 included retentions to be collected within one year of $29.7 million and $25.2 million, respectively. Contract retentions collectible beyond one year are included in other assets in the condensed consolidated balance sheet and totaled $0.3 million at June 30, 2016 and $2.8 million at June 30, 2015. Accounts payable included retentions of $14.9 million at June 30, 2016 and $10.2 million at June 30, 2015. Accounts payable retentions are generally expected to be settled within one year.

Other

During the year ended June 30, 2015 our results of operations were materially impacted by charges resulting from a change in estimate related to an acquired EPC joint venture project in the Electrical Infrastructure segment. The charges resulted in a reduction to operating income of $53.4 million and an after-tax reduction of $18.3 million to net income attributable to Matrix Service Company for fiscal year 2015. The Company recorded additional charges on this project during the year ended June 30, 2016, which resulted in a reduction to operating income of $7.1 million and an after-tax reduction to net income attributable to Matrix Service Company of $2.5 million. The fiscal 2016 project charges are attributable to higher than expected project closeout costs. The Company reached substantial completion on the project in the fourth quarter of fiscal 2015.

Under percentage of completion accounting for fixed-priced contracts, contract revenues and earnings are recognized ratably over the contract term based on the proportion of actual costs incurred to total estimated costs. As of June 30, 2016, the Company is performing work on two previously announced significant multi-year projects that are contracted on a fixed price basis. One of the projects is expected to be complete in fiscal 2017 and the second project is expected to be complete in fiscal 2018. Based on the information currently available, the Company believes that its current estimates relating to these projects are reasonably stated. However, it is reasonably possible that changes to these contract estimates, including those related to project costs, project timelines, and change orders or claims, could occur and have a material positive or negative impact to our results of operations and financial position in subsequent accounting periods.